Should online Filipino workers, such as bloggers, copy writers, SEO professionals, virtual assistants and other Internet freelancers pay taxes to the government through the BIR? If you are earning income from blogging and from providing services to clients online, that question may have popped out on your mind. Other online service providers, particularly those who are already earning significant amount of revenue, may have already registered their businesses as single proprietorship, partnership or corporation. Thus, they are already paying taxes out of those types of businesses. But for bloggers and other online professionals who are not yet earning as big as those guys, should they remit a portion of their hard-earned money to the BIR? Let’s start breaking this question and find more answers.
Who are required to pay taxes?
There are many taxes in the Philippines, such as business taxes and income taxes. There are also local taxes, such as property taxes and other taxes we pay to the local government units. Every Filipino is perhaps paying taxes on their purchases of goods and services which are subject to VAT (Value Added Taxes). When you buy a shampoo in a VAT registered grocery store, it’s actually you who pays the Value Added Tax that the seller is charging to their customers.
For the interest of our online workers, professionals, and freelancers, the question we will answer is who are required to file and pay income tax with the BIR? According to the tax code, Income Tax is a tax on a person’s income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income, by the Tax Code, as amended, or other special laws. When bloggers and online freelancers earn income, their income can generally be considered coming from their practice of profession. Thus, they may be required to file and pay income tax to the BIR.
Bloggers and webmasters usually earn income from advertising and from selling their services. Other online professionals, such as virtual assistants, social media strategists, SEO specialists, content writers and website designers usually earn income from selling their services. But what if aside from earning those profits, you are also employed in a particular company? In this scenario, you will be considered as a mixed income earner, a person who receives both compensation income and income from the conduct of trade or business and/or practice of profession. Self-employed individuals and individuals who are mixed income earner are actually taxed similarly by the BIR.
Who are not required to file income tax?
Now, are there any instance that online professionals may not be required from filing income tax? According to the BIR website, individuals who are minimum wage earners and those whose gross income does not exceed his total personal and additional exemptions are not required to file income tax returns. The minimum wage rates for different regions in the country are published in the Department of Labor and Employment (DOLE) website. Personal and additional exemptions are the P50,000 personal exemption (single, head of the family or married) plus the additional P25,000 for each qualified dependent (maximum of four). For example, if you’re single and have 2 qualified dependents, your total personal and additional exemptions are equivalent to P100,000. Thus, if your total gross income for the taxable year doesn’t exceed P100,000, you are not required to file income tax. However, according to the code (as amended), “a citizen of the Philippines and any alien individual engaged in business or practice of profession within the Philippine shall file an income tax return, regardless of the amount of gross income”. This means that if blogging is considered as your business or practice of profession, you are still required to file Income Tax Return regardless of the amount of gross income (or even if your income tax payable is NIL).
Bloggers can opt to register as a self-employed professional with the BIR to secure TIN and have the authority to print their Official Receipts. Check out our guide on how to register with the BIR as a self-employed professional at the bottom of this post. Registering business or professional company as partnership or a corporation can also be an option. However, partnerships and corporations are also required to be registered with the Securities and Exchange Commission (SEC). Thus, for bloggers and online professional who are just starting to build their wealth may not afford the cost of incorporation or starting partnership. Besides, these types of businesses are for multiple owners, that is, partners and shareholders. But you can still consider it for the future.
Also take note that when your blogging and freelancing activities are already considered as part of your regular activities, your income may already be considered as income from business or practice of profession which should be filed to the BIR using income tax return even when there is no tax payable after computing your revenue, expense and taxable income. Moreover, when you register with the BIR as a self-employed taxpayer, you also have to file the applicable BIR tax returns stated in your certificate of registration even if there’s no amount payable. Remember that when there is an amount of tax payable, you should “file and pay” – file the BIR return and pay the amount payable. On the other hand, when there is no amount of tax payable, you only have to “file” – file the BIR return.
Advantages of BIR registration and paying income tax
What are the benefits of registration and filing of income tax return with the BIR? Here are some of its advantages:
1. Income tax return is the standard proof of income which you can use for obtaining bank loans or PAG-BIG/SSS loans, applying for credit card, or for presenting documents for VISA application.
2. Registration with the BIR will give you TIN (Taxpayers’ Identification Number). TIN card is a valid ID you can use for any financial transactions with the bank or for money transfer transactions with the Western Union or other similar agencies.
3. The Tax Identification Number is also a required information to be filled up in government documents and transactions, such as in applying for Driver’s License with the LTO and Passport with the DFA. Also, opening of new bank accounts usually requires your TIN.
4. BIR registration as a self-employed professional will already give you an authority to print your official receipts. If you have an OR to issue, you can already be confident to do transactions with your clients. Big companies who may advertise on your blogs or who may ask for your web designing services usually ask for official receipts.
5. By paying income tax and other taxes that will be imposed on you, you will become a more responsible and law abiding citizen. This will also reduce your future obligations (i.e., penalties, interests, surcharges and compromise) for non-registering and non-filing of required taxes. It will also give you good conscience and good night’s sleep at night.
6. As a good taxpayer, you will be more confident in shouting in the streets, in your blog, in your Facebook status or in your tweets in condemning and criticizing corrupt government officials who are stealing our national fund, where part of your hard-earned money goes. Well, if you don’t pay your taxes, what can you say?
Other resources you should read
Tax is one complicated discussion that we might need hundred of days to discuss. There are still other things that we need to tackle, like the types of taxes we should pay with the BIR aside from income tax. As a registered self-employed professional, you are also required to pay either percentage tax or Value Added tax (not both). You may also be required to pay withholding taxes. For example, if you are renting an office, you should withhold a portion of the rental fee you are paying to the lessor and remit it with the BIR. To supplement your knowledge about taxation in the Philippines, here are some articles we have published to guide you.
How to register with the BIR (for professionals)
What taxes should I pay in the Philippines?
How to compute and file your income tax (for self-employed individual)
How to compute monthly percentage tax (if you’re a NonVAT registered taxpayer)
How to compute VAT Payable (if you’re a VAT registered taxpayer)
How to compute expanded withholding tax
Types of Business in the Philippines
You can also browse our Taxation category to find more articles about the Philippine taxation.
Now, let’s go back to our question. Should bloggers, freelancers and online workers pay taxes? My answer to that question is yes, if you are required.
(Updated on April 11, 2013)
Disclaimer: This article was written and published for informational use only. There maybe other important information that we might have missed to discuss in relation to the topic discussed above. Furthermore, new and subsequent BIR rulings, issuances and or laws in the future may render the whole or part of the article obsolete or inaccurate. For more information and inquiries, you may visit the BIR website or the BIR office in your jurisdiction for confirmation.